Magical reality is the fuel that powers valuations in tech

Magical reality is the fuel that powers valuations in tech. Less than two years after Apple became the first public company to hit a trillion-dollar market capitalisation, it topped $1.6 trillion. Neither sales nor profits have matched the pace of share price growth. Yet a $2 trillion market cap does not look out of reach. The first milestone took almost four decades. The second is likely to be a lot speedier. Between them, Apple, Amazon and Microsoft have added more than a trillion dollars in market value since the start of 2020. What could derail the rally? Two things: continuing economic recession and more forceful antitrust regulation… The indecent haste with which $1 trillion companies Apple, Microsoft and Amazon became $1.5 trillion-plus companies lifted the wider tech sector. It also encouraged carelessness. For a brief period after last year’s WeWork farce, it seemed as though every tech start-up nearing a listing had to be profitable or have a bulletproof plan on how to get there. In the heat of the rally, gross margins were suddenly dropped as a talking point. Now margins and moderation are back in focus. Four of the most powerful chief executives in big tech — Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg, Apple’s Tim Cook and Alphabet’s Sundar Pichai — are due to appear in front of a House committee and can expect questions designed to make them squirm. The race to $2 trillion is still on. But after months of excess it appears that a minor reality check is under way. 

Elaine Moore